Question

Some friends tell you that they paid $25,000 down on a new house and are to pay $525 per month for 30 yrs. If interest is 7.8% compounded monthly, what was the selling price of the house? How much interest will they pay in 30 years?

Answer 1

Just like the previous problem, using the same symbols,
A=monthly payment
P=present value
n=number of periods (months)
i=nominal annual interest/12
R=1+i

Using
\(PR^n = A(R^n-1)/i\)
you know 4 of the 5 variables, so you can solve for the remainder, whatever is given to you.

In this case, to find the selling price, solve for P, and add $25000.
Interest is total amount paid, less original amount (P, or present value).
= A*n-P

Answer 2

So
A=525
n=(12*30)
i= (.078/12)
R= 1+ (.078/12)